SBI's Microfinance Initiatives

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Case Details:

Case Code : FINC043
Case Length : 17 Pages
Period : 1995-2005
Pub. Date : 2005
Teaching Note :Not Available
Organization : SBI
Industry : Banking
Countries : India

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Foray Into Microfinance

SBI has been actively involved in the microfinance sector as it serves both the social and commercial objectives of the bank. It was the largest player in the microfinance sector in India in terms of loans disbursed to SHGs (Refer Table II for SHG-Bank Linkages of Major Banks in India).

According to Ashok Kini, managing director of SBI, "We see over 2 million people who have the will to better their lives, but have been suffering on account of finances, to benefit from the move."

SBI has been an active participant in the microfinance sector since 1992, when the National Bank for Agriculture and Rural Development (NABARD) launched the pilot phase of the SHG-Bank Linkages program. In that year, SBI started the SHG linkage program on an experimental basis in a few of its branches. After a couple of years, SBI decided to extend the program to its rural and semi-urban branches all across India...

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The Road Ahead

According to a World Bank-NCAER Rural Finance Access Survey conducted in 2003, the reach of microfinance was limited to only 6.6% of the total demand in India. The average loan provided to each SHG member was about Rs. 1,766. In 2002-03, only 22% of the existing SHGs took loans from the banks.

The southern region of India accounted for 65% of the SHGs linked with banks and 75% of the amount being disbursed. The states in the North Eastern regions of India accounted for just 0.6% of the SHGs and 0.3% of the amount disbursed in the fiscal 2002-03. The Eastern region which was densely populated and poverty ridden accounted for 12.6% of the total number of SHGs and 5.9% of the amount disbursed. The top management of SBI visualized significant potential in SHG financing since only about 25% of the bank's branches had formed or provided loans to SHGs. Though the total SHGs financed by SBI stood at 343,691 as of 2005, the number of SHGs financed per branch was just 35...


Exhibit I: SBI - Schemes in Agricultural Banking
Exhibit II: A Note on Self Help Groups

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